MDU-CPAS

ASSIGNMENT
OF
ALTERNATIVE DISPUTE RESOLUTION SYSTEM (ADR)

SESSION – 2020-2021

TOPIC – CONCEPT AND HISTORY OF ADR

IN INDIA

Submitted to Submitted by
Dr. Anupam Kurlwal Tanya Chhabra
Asstt. Prof. (Law) Roll no. 3591-B
B.A L.L.B (IX Sem)

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ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards

to my guide Asst. Professor in Law, Dr. Anupam for his exemplary
guidance, monitoring and constant encouragement to give shape to this
assignment. The blessing, help and guidance given by them time to time
shall carry me a long way in the journey of life on which I am about to
embark.

I also take the opportunity to express a deep sense of gratitude to my

respected seniors who shared their cordial support, valuable information
and guidance, which helped me in completing the task through various
stages.

Last but not the least, I think the almighty, my parents, brother, sisters and
friends for their constant encouragement without which this assignment
would not have been possible.

Tanya Chhabra

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TABLE OF CONTENTS

INTRODUCTION…………………………………………………………………………………... 4

CONCEPT OF ADR………………………………………………………………………………... 4

ADR SYSTEM IN INDIA………………………………………………………………………….. 4

HISTORICAL BACKGROUND…………………………………………………………………… 5

PURPOSE OF ADR………………………………………………………………………………… 6

OBJECT AND SCOPE OF ADR…………………………………………………………………… 6

ADVANTAGES OF ADR…………………………………………………………………………... 7

DISADVANTAGES OF ADR………………………………………………………………………. 8

CONCLUSION………………………………………………………………………………………. 9

BIBLIOGRAPHY…………………………………………………………………………………… 10

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Introduction

Arbitration in India is an age old concept, originating in ancient India. The same is a grass root
system called Panchayat (s). It is still prevalent today in villages where the seniors of the village
or community sit and resolve disputes of villagers and/ or community. Therefore, it cannot be
said that Arbitration as a concept or Alternate Dispute Resolution is a foreign import on the
Indian legal system.
Alternative Dispute Resolution is today being increasingly acknowledged in the field of law as
well as in the commercial sector, the very reasons for origin of Alternative Dispute Resolution
are the tiresome processes of litigation, costs and inadequacy of the court system. It broke
through the resistance of the vested interests because of its ability to provide cheap and quick
relief. In the last quarter of the previous century, there was the phenomenal growth in science
and technology. It made a great impact on commercial life by increasing competition
throughout the world. It also generated a concern for consumers for protection of their rights.

Concept of ADR

Alternative Dispute Resolution (ADR) system, as per in literal meaning refers to the use of an
‘alternative’ (informal) techniques of dispute resolution.
Any method of resolving disputes without litigation (outside the courtroom) is known as
Alternative Dispute Resolution System (ADR).
ADR can be defined as a collective description of process or mechanisms that parties can use to
resolve disputes rather than bringing a claim through the formal court structure.

ADR system in India

There is a long and old tradition in India of the encouragement of dispute resolution outside the
formal legal system. Disputes were quite obviously decided by the intervention of elders or
assemblies of learned men and other such bodies. Nyaya Panchayats at the grass root level were
there even before the advent of the British system of justice. However, with the advent of the
British Raj, these traditional institutions of dispute settlement somehow started withering and
the formal legal system introduced by the British began to rule on the basis of the concept of
omissions of rule of law and the supremacy of law.

It was only after Independence, the fact that the formal legal system will not be in a position to
bear the entire burden and the system requires drastic changes. The mounting arrears in the
courts, inordinate delays in the administration of justice and expenses of litigation have
gradually examine and choose a right formal legal system such as Alternative Dispute
Resolution procedures and to organise the same on more scientific lines.

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Historical Background

 ADR mechanisms were initiated by East India Companies during British Raj. With the advent
of the British rule and the introduction of their legal system in India starting from the Bengal
Regulation of 1772, the traditional system of dispute resolution methods in India gradually
declined. The successive Civil Procedure Codes enacted in 1859, 1877 and1882, which codified
the procedure of civil courts, dealt with both arbitration between parties to a suit and arbitration
without the intervention of a court.

The first Indian Arbitration Act was enacted in 1899 which was largely based on the English
Arbitration Act, 1934.The year 1940 is an important year in the history of law of arbitration in
British India, as in that year the Arbitration Act, 1940 was enacted. The Arbitration Act, 1940
dealt with only domestic arbitration. In so far as international arbitration was concerned, there
was no substantive law on the subject. It consolidated and amended the law relating to
arbitration as contained in the Indian Arbitration Act, 1899 and the Second Schedule to the
Code of Civil Procedure, 1908. Though the Act of 1940 was a good piece of legislation but it
was considered to be ineffective. In M/S Guru Nanak Foundation v. M/s Ratan Singh &
Sons (1981) 4 SCC 634, the Hon'ble Supreme Court observed that the Act was Ineffective and
the way the proceedings under this Act were conducted in the Courts made the lawyers laugh
and legal philosophers weep.

Later on this was repealed and thus The Arbitration and Conciliation Act of 1996 was enacted
due to some misconstruction of the before Act of 1940.

Thus 'The Arbitration and Conciliation Act, 1996"came into being. The law relating to
Arbitration and Conciliation is almost the same as in the advanced countries. Conciliation has
been given statutory recognition as a means for settlement of the disputes in terms of this Act.
This legislation has developed confidence among foreign par-ties interested to invest in India or
to go for joint ventures, foreign investment, transfer of technology and foreign collaborations.
In 1999, the Indian Parliament passed the CPC Amendment Act of 1999 inserting Sec 89 in the
Code, providing for reference of cases pending in the courts to ADR which included mediation.
The Amendment was brought into force with effect from 1st July 2002.

Modern ADR is a voluntary system, according to which the parties enter a structured
negotiation or refer their disputes to a third party for evaluation and/or facilitation of resolution.
Especially in the light of the facts that the justice system is flooded by disputes of variable
importance and complexity, ADR has now become an acceptable and often preferred alternative
to judicial settlement and an effective tool for reduction of arrears of case. The alternative
modes of dispute resolution include arbitration, negotiation, mediation and conciliation.
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Purpose of ADR

ADR aims to provide the parties with cheap, speedy and less formalistic remedy to the
aggrieved party. It aims at providing a remedy which is most appropriate in the circumstances
of the case. This makes ADR a viable substitution for arbitration or litigation. ADR is an
umbrella term for a variety of processes which differ in form and application. Alternative
Dispute Resolution, as the name suggests, is an alternative to the traditional process of dispute
resolution through courts. It refers to a set of practices and techniques to resolve disputes
outside the courts. It is mostly a non-judicial means or procedure for the settlement of disputes.
In its wider sense, the term refers to everything from facilitated settlement negotiations in which
parties are encouraged to negotiate directly with each other prior to some other legal process, to
arbitration systems or mini trials that look and feel very much like a court room process.

Object and Scope of ADR

It is the spirit and not theform oflaw that keeps thejustice alive" — LJ
"Alternative Dispute Resolution" (ADR) is supposed to provide an alternative not only to civil
litigation by adjudicatory procedures but includes also arbitration itself. The institution of
arbitration came into being as a very useful alternative to litigation. But it is now being viewed
as closer to litigation because it has to be in accordance with statutory provisions and becomes
virtually an adjudicatory process with all the formalities ofthe functioning ofa court. A method
of dispute resolution would be considered as a real alternative only if it can dispense with the
adjudicatory process, even if it is wholly a consensual process. It may be worked by a neutral
third person who may bridge the gap between the parties by brunging them together through a
process of conciliation, mediation or negotiations.

As previously noted, ADR is a broad spectrum of structured processes including mediation and
conciliation, which does not include liti gation though it may be linked to or integrated with
litigation. and which a involves the assistance of a neutral third party, and which empowers
parties to resolve their own disputes. ADR is an umbrella term for a variety ofprocesses which
differ in form and application. Differences include: levels of formality the presence of lawyers
and other parties. The role of the third party (for example, the mediator) and the legal status of
any agreement reached. Some common features relating to the acronym ADR. For example:
1. There is a wide range of ADR processes;
2. ADR excludes litigation;
3. ADR is a structured process;
4. ADR normally involves the presence of an impartial and independent third party,
5. Depending on the ADR process, the third party assists the other two parties to reach a
decision. or makes a decision on their behalf; and
6. A decision reached in A DR may be binding or non-binding.

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Time has come to think to provide a forum for the poor and needy people who approach the
Law Courts to redress their grievance speedily. As we all know the delay in disposal of cases in
Law Courts, for whatever reason it may be, has really defeated the purpose for which the people
approach the Courts to their redressal. Justice delayed is justice denied and at the same time
justice hurried will make the justice buried. So we will have to find out a via media between
these two to render social justice to the poor and needy who wants to seek their grievance
redressed through Law Court. Considering the delay in resolving the dispute.
Abraham Lincoln has once said:
“Discourage litigation. Persuade your neighbours to compromise wheneveryou can point out to
them how the nominal winner is often a real loser, in fees, expenses, and waste of time."

Advantages to Arbitration:

1. More Flexibility - In the case of arbitration, the parties have far more flexibility to select
what procedural and discovery rules will apply to their dispute (they can choose to apply
relevant industry standards, domestic law, the law of a foreign country, etc.).

2. ADR is speedy - Trials are lengthy, and in many states and counties it could take years to
have a case heard by a judge or jury. Appeals can then last months or years after that. In a
matter of hours, an arbitrator often can often hear a case that otherwise may take a week in court
to try with live witnesses. With arbitration, the evidence can be submitted by documents rather
than by testimony presented through witnesses. ADR can be scheduled by the parties and the
panelist as soon as they are all able to meet together.

3. Expenses are reduced - Attorneys and expert witnesses are very expensive. Litigating a case
can easily run into the tens of thousands of dollars. Alternative dispute resolution offers the
benefit of getting the issue resolved quicker than would occur at trial – and that means less fees
incurred by all parties.

4. Select your own Arbitrator or Mediator - The parties can often select the arbitrator or
mediator that will hear their case, typically selecting someone with expertise in the substantive
field involved in the dispute. The arbitrator (or panel members) need not even be an attorney. In
this way the focus can be on the substantive issues involved rather than on technical procedural
rules. In normal litigation, the parties cannot select the judge, and the judge and/or jury may
often need expert witnesses to explain extremely complex issues. The greater the expertise of
the arbitrator, the less time that needs to be spent bringing him up to speed.

5. Results can be kept confidential - The parties can agree that information disclosed during
negotiations or arbitration hearings cannot be used later even if litigation ensues. The final
outcome can also be made private if the parties so stipulate and agree. On the other hand, most
trials and related proceedings are open to the public and the press.
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6. Preserves relationship – ADR preserves relationship by reducing complexities between the
parties as it is there in the court proceedings. ADR allows the parties to work together with the
neutral arbitrator or mediator to resolve the dispute and come to a mutually acceptable remedy.

7. Party Participation - ADR permits more participation by the litigants. ADR allows the
parties the opportunity to tell their side of the story and have more control over the outcome
than normal trials overseen by a judge. Many parties desire the opportunity to speak their piece
and tell their side of the story in their own words rather than just through counsel.

8. A jury is not involved - Juries are unpredictable and often damage awards are based solely
on whether they like the parties or are upset at one party because of some piece of evidence
such as a photo that inflames the passion of the jury. Juries have awarded claimants damages
that are well above what they would have received through alternative dispute resolution; and
they have also done the opposite.

Because of these advantages, many parties choose ADR (either mediation or arbitration) to
resolve disputes instead of filing or even proceeding with a lawsuit after it has been filed. It is
not uncommon after a lawsuit has been filed for the court to refer the dispute to a neutral before
the lawsuit becomes too costly. ADR has also been used to resolve disputes even after trial,
while an appeal is pending.

Disadvantages of ADR:

1. There is no guaranteed resolution - With the exception of arbitration, alternative dispute

resolution processes do not always lead to a resolution. That means it is possible that you could
invest the time and money in trying to resolve the dispute out-of-court and still end up having to
proceed with litigation and trial before a judge or jury. However, you will certainly better
understand the other side’s position!

2. Arbitration decisions are final - With very few exceptions, the decision of a neutral
arbitrator cannot be appealed, with fraud being an obvious exception. Additionally, some states
will not enforce decisions of arbitrators that are patently unfair, a high standard to meet.
Another ground for setting aside an award is if the arbitrator’s decision exceeded the scope of
the arbitration clause or agreement. Some arbitration clauses are broad, others are narrowly
limited to specific disputes. Decisions of a court, on the other hand, usually can be appealed to
an appellate court for a variety of legal grounds and for numerous alleged procedural errors.

3. Limits on Arbitration Awards - Arbitrators can only resolve disputes that involve money.
They cannot issue orders compelling one party to do something, or refrain from doing
something (also known as injunctions). For example, Arbitrators generally cannot change title
to real property. Of course this is subject to the specific language of the arbitration clause.
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4. Discovery Limits - Some of the procedural safeguards designed to protect parties in court
may not be present in ADR, such as the liberal discovery rules used in U.S. courts, which make
it relatively easy to obtain evidence from the other party in a lawsuit.

5. Fee for the Neutral - The neutral mediator or arbitrator charges a fee for his or her services.
Depending on the arbitrator or mediator selected, the fees can be substantial (of course the
parties typically agree to divide the fees between themselves). Depending on the contract
language and state law, a prevailing party can be awarded fees and costs. A judge on the other
hand, charges no fees for his services.

5. May have no choice - Often the contract in dispute contains a broadly worded mandatory
arbitration clause. Many lease agreements and employment contracts, for example, contain
mandatory arbitration provisions, as do operating agreements and other types of business
contracts. Unless both parties waive arbitration, most states will compel arbitration at the
request of any party.

7. Non-binding arbitration -Sometimes the court may order nonbinding or Judicial

Arbitration. This means that if a party is not satisfied with the decision of the arbitrator, they
can file a request for trial with the court within a specified time period after the arbitration
award. Depending on the process ordered, if that party does not receive a more favorable result
at trial, they may have to pay a penalty or fees to the other side.

8. Warning -The parties pursing ADR must be careful not to let a Statute of Limitation run
while a dispute is in any ADR process. Once the statute expires, judicial remedies may no
longer be available.

Conclusion:

ADR refers to a variety of processes that help parties resolve disputes without a trial. It is a
procedure for settling disputes by means other than litigation. It consists of simple methods. It is
a substitute to conventional methods. It is a substitute to conventional methods of resolving
disputes which covers civil and commercial nature of business. The main aim is to provide
alternative mode of dispute resolution in the common law countries.

There is no single answer as to whether to pursue litigation or ADR. Instead, the circumstances
of each case need to be weighed and carefully analyzed by all concerned parties. Knowing all
the options is an important first step. This can be done by considering the advantages and
disadvantages of each proposed ADR method and discussing it with trusted and experienced
legal counsel.

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Bibliography

Books:

 Dr. Anupam Kurlwal “An Introduction to ALTERNATIVE DISPUTE RESOLUTION

SYSTEM (ADR)” (3rd Ed Central Law publications, 2017)
 OP Malhotra, Indu Malhotra, ‘The Law and Practice of Arbitration & Conciliation, (2 nd
Ed, LexisNexis,2006) 

Weblinks:

 http://www.duhaime.org/LegalResources/CivilLitigation/LawArticle-18/Alternative-
Dispute-Resolution-ADR-An-Introduction.aspx
 http://www.justice.govt.nz/publications/global-publications/a/alternative-dispute-
resolution-general-civil-cases/4-advantages-and-disadvantages-of-adr
 http://www.life123.com/career-money/business-law/contracts/disadvantages-of-
alternative-dispute-resolution.shtml
 http://www.fdrindia.org/publications/AlternativeDisputeResolution_PR.pdf

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